$2B payroll problem estimate 'unhelpful' - Woodhouse

More than 700,000 Kiwi workers could have been underpaid up to $2 billion because of confusion about holiday pay and Labour says it's time the Government came up with a proper solution.

How widespread the problem is was estimated in a report by the Ministry for Business, Innovation and Employment (MBIE) released to Radio New Zealand under an Official Information Act request.

The problem could date back years, and affect thousands of employees and employers because the Holidays Act hadn't been applied correctly.

It's thought those who work variable hours, including those in hospitality, could be the most affected.

The Government is still trying to figure out how big the problem is, but advice from 2014, when the problem first came to their attention, estimated employees had been underpaid between $250 and $500 a year on average.

It estimated anywhere between 194,700 and 763,350 employees were likely to be owed money.

Officials thought the annual costs could be between $50 million and $382 million a year. Using those calculations going back six years, which is the legal limit for liability, the figure could range between $292 million and $2.2 billion, RNZ reports.

The problem lies within the Holidays Act which gives two ways to calculate holiday pay. One is based on ordinary weekly pay -- earnings over last four weeks, divided by four.

The other involves average weekly pay -- earnings over the last 52 weeks, divided by 52.

Employers should use the greater of the two figures.

Labour's economic development spokesman David Clark says the Government needs to fix the problem which affects one in three Kiwi workers.

Workers could be owed thousands, he says.

"The Government will try to blame employers but ultimately they must take responsibility because they are in charge of guiding business and enforcing the law.

"Before the Government attributes blame they should take a look at themselves because MBIE -- the ministry in charge of enforcing the law -- has itself underpaid its employees."

But Revenue Minister Michael Woodhouse says the figures were just speculation and "very unhelpful".

Such estimates about how widespread the problem was were based on limited information so was "premature and unhelpful".

MBIE's website says it did desktop calculations to get a "broad range of estimates as to the size of the problem".

However, their report warned getting "robust and precise" estimates wasn't possible because of a lack of data about business operations.

As of April this year, the amount owed has been calculated in 10 of 28 investigations it has completed this year. They've ranged from an average of $70 per affected worker in one organisation to $1800 in another.